This post explains how to implement a manufacturing process where you provide some or all inventory to an external manufacturer. This tutorial assumes a working knowledge of Acumatica, but is also designed to give those who don’t have that knowledge a glimpse into what Acumatica Cloud ERP Software can do to transform business processes.

Business Process

Your business buys inventory and ships it to a third party manufacturing firm. The third party firm produces the end product for a contracted fee. You need to audit that the proper amount of inventory is being used in the manufacturing process and make sure that the total cost of the finished goods is tracked accurately.

The workflow for this scenario is as follows:

Create a purchase order for raw materials and ship it to the manufacturer’s warehouse

Receive the goods at the manufacturer’s warehouse

Create a production order for the finished goods and send to outside manufacturer

Receive/enter an invoice for the manufactured goods that includes the quantity produced

Run production – reduce inventory of raw materials and create finished goods

A non-stock item includes the cost above raw materials for the produced item

Ship items from vendor site to main warehouse

Inventory Checks

At periodic intervals, the vendor will report the amount of inventory that is available. The available amount should match the amount reported in Acumatica within a specified tolerance.

Implementation Setup in Acumatica

In this example, we will produce a circuit board with the help of an outside manufacturer. We will purchase raw materials (resin and screws) and ship them to our supplier.

Step 3: Create production order and run production

When move is released, the production order is completed (assuming all items produced):

Raw materials are backflushed and the new items are received into inventory. The unit cost is taken directly from the production order.

Step 4: Enter invoice from external supplier

I entered the production order number as the vendor reference number.

Step 5: Transfer inventory to US warehouse

Create a simple transfer order to move the finished goods to a new location.

Step 6: Validate inventory

Assume we receive the following report from our external manufacturing vendor:

RAW01 (screw): 4,000 in stock

RAW02 (resin): 425 grams in stock

Using standard inventory screens, the totals can be validated.

In this case, the amount reported is 5 grams short, so we would have to make an adjustment entry in our inventory stock.

Since the variance amount (5/70 = 7.1%) is outside the tolerance (+/- 5%), we would follow procedures to resolve the issue.

Conclusion

Using Acumatica with the Advanced Manufacturing module from JAAS Systems, you can supply inventory to external manufacturing vendors without losing control of your inventory and costs.

Inventory issued to the external manufacturer is automatically maintained by the system

Inventory costs are accounted for when finished goods are produced

Tracking reports allow you to manage external manufacturer performance for production materials usage

Since Acumatica is web-based with strict access controls, you can enable external vendors to enter inventory data and vendor invoices. With simple configuration, you can provide external vendors with the ability to access and update production orders.

To learn more about JAAS Manufacturing, watch the below video. I recommend that you enlarge the video to full screen width for best viewing.

Have a unique controlled inventory scenario? Contact djohnson@acumatica.com with requirements to see if the solution can be easily adapted for your needs.

VP, Product Management at Acumatica. Doug is in charge of showing people the specifics about what makes Acumatica’s Cloud ERP software awesome for our customers and partners. For other tips and technical training, stay tuned on Tuesdays.

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About Acumatica ERP system

The Acumatica ERP (Enterprise Resource Planning) system delivers adaptable cloud and mobile technology with a unique, all-inclusive user licensing model. Acumatica provides a complete real-time view of your business anytime, anywhere, on any device. Through our worldwide network of partners, Acumatica ERP provides a full suite of integrated business management applications, including Financials, Distribution, Project Accounting, and CRM, as well as separate Field Service Edition, Commerce Edition, Manufacturing Edition, and Construction Edition. There is only one true Cloud ERP platform designed for mid-sized customers: Acumatica.